Friday, December 18, 2009

Global markets have rallied "too much, too soon, too fast" this year but acorrection will not happen right away, as a cheap dollar will still encourage investors to seek higher-yielding assets for a few more months, leading economist Nouriel Roubini said Thursday.Roubini, one of the few economists who accurately predicted themagnitude of the financial crisis, said the U.S. dollar will eventually recover some of its losses, but only in "six to 12 months from now, not any time soon."

I have nothing against Roubini; doomsayers are a dime a dozen (see my previous post). What I find incredible is how professional columnists at self-proclaimed "leading business networks" mindlessly genuflect at the alter of stopped clocks.

You've heard the old joke about how economists have successfully predicted 10 out of the last 2 recessions. Eric Tyson has a nice little piece claiming that Roubini is among these tireless prognosticators; see here. That's right, Roubini called the recession in 2004, 2005, 2006 and in 2007. As the old saying goes, even a stopped clock is correct twice a day. The puzzle is why there is such a large and persistent demand for stopped clocks.

Tuesday, December 15, 2009

An interesting recurring fact of human history is the endless supply of doomsayers. One would think that this large supply would drive the price (wages) of these prophets of doom to zero. But from Isaiah to Al Gore, we see that this is not so. We are left to conclude one of two things: either economic theory is wrong; or there exists a large persistent demand for doom and gloom. Naturally, I prefer the latter interpretation. But if so, then evidently, we like having the shit scared out of us. I'm not sure why this is the case, but if so, the phenomenon deserves study.

Most of you are likely too young to remember the hysteria created by the Club of Rome in their 1972 report The Limits to Growth. Not sure what ever happened to these bozos.

I remember my grade 3 teacher announcing to my class that at current rates of air pollution, the world was destined to run out of oxygen in 10 years (1980). I spent the rest of that afternoon trying to design an oxygen tent that might save my family from this impending disaster. Today, I'm sure that students would be well-versed in the technique of sequestering government "stimulus money" to finance the endeavor.

But then my attention was turned to a more pressing issue: the coming ice age; see Newsweek 1975 The Cooling World. Back then, meterologists (aka the experts) were convinced that the globe was cooling; and that disaster loomed on the short horizon. While no one was sure of what was causing the cooling trend, there was a strong suspicion that industrialization (aka capitalism run amok) had something to do with it. All that pollution blocking the sun's rays; and so on.

Fortunately, we didn't have to worry about global cooling for long; it was soon supplanted by a much more pressing concern: Acid Rain. The culprit? You guessed it: industrialization. Never heard of acid rain? Don't worry about it.

The latest, of course, is global warming...oops, I mean "Climate Change." The climate changing...imagine that. The culprit? Do I even have to ask?

How are we to understand all of this? H.L. Menken had this to say:"The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary."

One of my colleagues (Charles Crawford) had this to say: "Why is there such zeal for belief in global warming? I think that it taps into many different sources of the desire for power. Some think it will allow regulation of the evil capitalist system. Others see opportunities for new capitalist opportunities. Some feel it will put a crimp in the style of rising economics, such as China. Others with Puritan sentiments find it satisfying. It would be interesting to explore the desires for power that encourage belief in global warming."

Another one of my colleagues (John Heaney) offers this: "Guilt, as a feeling merited or unmerited, reduces a natural inclination to oppose bogus authority. It is amazing that more or less random unwarranted associations suffices to produce this feeling with effect.Climate justice, climate debt, climate reparations, climate colonialism.Almost certainly, these slogans, will be the permanent legacy of Copenhagen. So why worry about the science?"

I like this letter to the editor of the Economist Magazine, Dec 12, 2009 by Paul Reiter: "Sir-- Passion is the root problem in what you term 'the modern argument over climate change'. ('A heated debate', November 28th). You state for instance, that the 'majority of the world's scientists have convinced themselves' that human activity is the cause of climate change. I know of no poll that confirms this, but your choice of words is telling. In science, our interpretations of nature are based on observation, experiment and evidence, not self-conviction. Those of us who are dismissed, often derided, as sceptics have waited a long time for the chicanery behind the global-warming movement to come to light. But we should not blame scientists --however unprincipled--nor UN organizations, nor national governments. The true culprits are latter-day Nostradamuses, who, under their icons of cuddly pandas and polar bears, have misused science to stoke fear, guilt and a craving for atonement in the minds of the public. Governments have been browbeaten to respond to these catastophists, and some scientists, dependent on public money, have fashioned their behaviour accordingly. Nikolay Semyonov, a Soviet scientist and Nobel prize winner in chemistry, wrote that: 'There is nothing more dangerous than blind passion in science. This is a direct path to unjustified self-confidence, to loss of self-cricalness, to scientific fanatacism, to false science. Given support from someone in power, it can lead to suppression of true science, and since science is now a matter of state importance, to inflicting great injury on the country.' Semyonov was referring to the ruthless manipulation of Soviet science by Trofim Lysenko and other opportunists. In a similar vein, it is time we recognize that we are becoming prey to a new fanaticism, a religious fervour that runs contrary to rational society."

Leigh Palmer notes that "It should be noted that Paul Reiter (of the Pasteur Institute in Paris) is a respected scientist and a former lead author for the IPCC assessments. He left the process and had his name removed as an author because the IPCC had published scientific misinformation regarding malaria in the second and third assessment reports. He had quite a battle with the officials of the IPCC over this and his story bears listening to. You can hear him tell this story in his own words here. His story is not entirely unique, as other lead authors and lead reviewers* have resigned from the IPCC process for very similar reasons.The IPCC has a mission. It was formed by the UN pursuant to the United Nations Framework Convention on Climate Change to gather evidence linking anthropogenic atmospheric carbon dioxide to harmful effects on the world's human population. In effect the IPCC is a prosecutor in a criminal proceeding with copious resources at its command to prove carbon dioxide guilty. The prosecutorial metaphor fails, however, because there is no institutional defense. Carbon dioxide is being tried by a modern Inquisition."

I am inclined to agree with these assessments. Not that this makes me feel any better. I think we can all agree that we would prefer to live in a cleaner world; and that it is desirable that society takes steps toward meeting this worthy goal. Why do many influential people feel the need to resort to scare tactics and bullying to achieve this goal (assuming that this is their goal)? And why do so many of us fall for it, time and time again?

Tuesday, December 1, 2009

The scientific community is buzzing over thousands of emails and documents -- posted on the Internet last week after being hacked from a prominent climate-change research center -- that some say raise ethical questions about a group of scientists who contend humans are responsible for global warming. Read more here: WSJ

Interesting development: Phil Jones, Director of the Climate Research Unit at University of East Anglia, is stepping down pending an investigation into the ethical conduct of his and perhaps other climate scientists' work on historical global temperature research; see here.

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Favorite Quotations

"Believe those who are seeking the truth. Doubt those who find it." Andre Gide

The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn't work and then they get elected and prove it (P.J. O'Rourke)

But to manipulate men, to propel them toward goals which you – the social reformers – see, but they may not, is to deny their human essence, to treat them as objects without wills of their own, and therefore to degrade them (Isaiah Berlin)

I believe that sex is one of the most natural, wholesome things that money can buy (Steve Martin)

Nothing so needs reforming like other people's habits (Samuel Clemens)